I used my CB9M Blog to document my years as Chairman and the events that deeply affected us. I am frezzing this blog at midnight December 31st 2007 coincidental with the expiration of my term as Chairman. It was an exiting period, spiritually & morally rewarding. I thank the many friends that I have made during my tenure and look forward to our collaborations in the future. I wil retain this blog as a repository of the history of our community for the last 4 years.
J. Reyes-Montblanc

Tuesday, May 31, 2005

Scrutiny for stadium funding

Note: towards the bottom of this article is an interesting comment that"that detail is among a list of facts about the stadium that have beenrevealed over time, but only because of prodding from legislative staff. Asrecently as last week, legislative analysts indicated the team had been tootight-lipped" ... implying that the fact that the stadium would need to beretrofitted has recently been discovered. I know that I and others (such asBrian Hatch) have been attempting to get the news to reveal this fact for aseveral years. I've known about it since 2000. Maybe the legislative staffjust discovered it, but reporters have known for some time and are just nowdeciding to talk about it.

Scrutiny for stadium fundingState leaders are questioning whether plan for Jets to borrow more than $1Bviolates New York City law

ALBANY -- With a $2.2 billion price tag, half of which could beunderwritten by taxpayers, the proposed West Side stadium would be the mostexpensive sports facility ever built and the recipient of a record publicinvestment.

But the size of those figures and the intricacies of the taxpayer subsidiesare stalling the plan's approval in Albany because legislative leaders saythe deal being pushed by Gov. George Pataki and Mayor Michael Bloombergincludes dubious practices.

"Everything that they've done was designed to stay away from legislativeapproval on a city and state basis," said one state legislative staffer whodid not want to be identified, but who has been meeting with stadium backers.

State and city borrowing, along with tax-exempt bonds, would cover morethan $1 billion of the Jets' costs, but state leaders are questioning morethan ever if the costs are justified.

A vote by the Public Authorities Control Board, which is controlled byPataki, Assembly Speaker Sheldon Silver and Senate Majority Leader JosephBruno, could come as early as Friday, clearing the way for much of thefinancing. Two scheduled votes have already been postponed.

Responding to reluctance to commit to the stadium in Albany, Bloomberg at aQueens parade Sunday, said he wasn't worried. "I'm optimistic that thespeaker and the majority leader and the governor will all come to theconclusion after they've done all of their due diligence that this is oneof the most important economic development projects in the city."

Attempt to evade votes

Despite his buoyancy, the stadium's financing plan has prompted warningsfrom legislative analysts, economists and other watchdogs, who charge thatPataki and Bloomberg are seeking to grant the Jets an unprecedented subsidywith as few legislative checks as possible.

Critics say that, in an attempt to evade votes by the State Legislature andthe City Council, Pataki and Bloomberg agreed to create one or more localdevelopment corporations, run jointly by the city and state, that wouldborrow $1.05 billion on the football team's behalf.

The stadium deal's architects say it is an effort to insulate taxpayers bymaking off-budget agencies liable for the financing, but the ways thatborrowing would be repaid have raised alarms.

Bloomberg has promised that the city would pay $300 million of thestadium's costs. But he intends to take payments in lieu of taxes -commonly known as PILOTs - that some developers pay instead of real estatetaxes, from other development projects and use them to repay the money thecity borrows for the stadium.

The City Council has challenged the move, saying the mayor cannotunilaterally divert the money. But in a battle that seems destined for thecourts, Bloomberg's lawyers assert that the mayor controls PILOTs becausethey are special contracts, not typical revenue.

Frank Mauro, executive director of the Fiscal Policy Institute, agovernment watchdog, has questioned Bloomberg's motives in seeking todivert the PILOTs. Mauro said the plan seeks to circumvent city law.

"It's an essential concept of democracy that a legislative body has thepower of the purse," Mauro said. "It seems the mayor is buying intosomething where the ends justify the means."

Subsidy or not a subsidy

Another part of the financing is a plan for the development corporations toborrow $450 million in tax-exempt bonds to help the team pay for thestadium. Instead of paying real estate taxes, the Jets would use their ownPILOTs to pay back the city and state, which are borrowing $450 million atreduced interest on the team's behalf.

Watchdogs have called this a subsidy, but the Jets disagree, saying theywould still be liable in the long term.

Thad Sheely, the Jets' vice president of development, said the city andstate proposed the tax-exempt borrowing to save the team $70 million thatis now going to pay for two pedestrian bridges and a concourse that wouldsteer stadium crowds to the Hudson River.

"The public is going to have an ownership interest in the building," Sheelysaid.

Still another element of the plan is the state's $300 million commitment.After requests from state legislative leaders about the income required toback the bonds, Pataki's aides said last week that the stream may come fromincome taxes.

Charles Gargano, chairman of the Empire State Development Corporation, thestate's development agency, said revenue generated by the stadium wouldeasily cover the city and state debt.

"Player salaries alone is a huge amount of income tax," Gargano said. "Andthen you have sales tax on tickets ..."

MTA suit looms large

The stadium is also jeopardized by lawsuits that claim the MetropolitanTransportation Authority, which owns the site on which the facility wouldbe built, gave a sweetheart deal to the team when it approved the Jets'$250 million bid although the authority had appraised the property at $900million. The State Supreme Court is to rule on those suits Thursday. To theteam's credit, experts on sports stadia note that owner Woody Johnson ismaking a record private contribution of as much as $1.6 billion as the teamlooks to end its lease at the Meadowlands in time to move to Manhattan forthe 2009 season.

"One thing that I believe has gotten lost in the mix here is that the Jets'owner is putting a tremendous amount of money at stake on the project andtaking the marketing risk himself," said Marc Ganis, a Chicago-based sportsconsultant.

The stadium proposal is also the centerpiece of the city's 2012 Olympicsbid. Pataki and Bloomberg want approval by the Public Authorities ControlBoard before the International Olympic Committee decides the host city July 6.

Legislative analysts who are monitoring the issue closely in the statecapital express strong doubts that the project will receive Albany'sblessing by July 6 because of the questions raised over the publicfinancing and the MTA's decision.

And while the stadium's boosters have pitched the plan as the savior of thecity's Olympics bid, a little-known fact has been largely left out of thedebate. The stadium would need to be retrofitted at additional cost toaccommodate a 400-meter running track. NYC2012, the nonprofit leading thebid, estimates that will cost $140 million - a cost it would pick up. Theconversion could also trigger a host of federal reviews because aredesigned stadium would jut out over the West Side Highway - a federalthoroughfare.

Prying out information

That detail is among a list of facts about the stadium that have beenrevealed over time, but only because of prodding from legislative staff. Asrecently as last week, legislative analysts indicated the team had been tootight-lipped.

"We haven't gotten a complete set of answers yet," Silver, a ManhattanDemocrat, said last week. "I think it's important for the public tounderstand the extent of the subsidies no matter what we ultimately do."

Last week, Bruno, a Brunswick Republican, received a 10-page response fromthe Jets, Pataki, Bloomberg and bankers underwriting the project about hisstaff's questions. But Bruno complained that the memo still did not fullyaddress the requests.

"It's the first time ever that someone asked us to vote with as littleinformation as we have had ... and they're just basic questions," saidBruno, who has called on Pataki and Bloomberg to participate in a publicmeeting with legislative leaders to air issues surrounding the proposal.

With the stadium site on the West Side of Manhattan, the construction andreal estate costs are among the highest in the world, compelling a largerpublic subsidy than the country has ever seen, said Robert Baade, aprofessor at Lake Forest College in Illinois. But as more cities try toconvince residents that sports facilities are good investments, Baade saidthe public is becoming more savvy about using public money to help pay forthem.

"When they become more educated," Baade said, "There's more resistance andthe financing becomes very important."